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Parallel trade, product quality, and welfare

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  • Matteucci, Giorgio
  • Reverberi, Pierfrancesco

Abstract

We study the welfare effects of parallel trade (PT) considering investment in quality. We thus revisit the case for PT in research-intensive industries. We find that PT may raise quality, depending on how preferences for quality differ across countries. Conditional on quality, consumer surplus may rise (fall) in the PT-source (PT-recipient) country. While PT reduces ex post welfare, improving quality is a necessary condition for PT to increase welfare ex ante.

Suggested Citation

  • Matteucci, Giorgio & Reverberi, Pierfrancesco, 2014. "Parallel trade, product quality, and welfare," Economics Letters, Elsevier, vol. 122(2), pages 258-262.
    • Handle: RePEc:eee:ecolet:v:122:y:2014:i:2:p:258-262
    DOI: 10.1016/j.econlet.2013.12.004
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    References listed on IDEAS

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    5. Gene M. Grossman & Edwin L.‐C. Lai, 2008. "Parallel imports and price controls," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 378-402, June.
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    Citations

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    Cited by:

    1. Giorgio Matteucci & Pierfrancesco Reverberi, 2017. "Drug innovation, price controls, and parallel trade," International Journal of Health Economics and Management, Springer, vol. 17(2), pages 159-179, June.
    2. Hwang, Hong & Peng, Cheng-Hau & Shih, Pei-Cyuan, 2014. "Parallel imports, product innovation and market structures," International Review of Economics & Finance, Elsevier, vol. 34(C), pages 237-245.
    3. Avenali, Alessandro & Bracaglia, Valentina & D'Alfonso, Tiziana & Reverberi, Pierfrancesco, 2018. "Strategic formation and welfare effects of airline-high speed rail agreements," Transportation Research Part B: Methodological, Elsevier, vol. 117(PA), pages 393-411.
    4. Reisinger, Markus & Saurí, Lluís & Zenger, Hans, 2019. "Parallel imports, price controls, and innovation," Journal of Health Economics, Elsevier, vol. 66(C), pages 163-179.
    5. Ishikawa, Jota & Morita, Hodaka & Mukunoki, Hiroshi, 2020. "Parallel imports and repair services," Journal of Economic Behavior & Organization, Elsevier, vol. 172(C), pages 137-160.
    6. Xuan Nguyen & Chi†Chur Chao & Pasquale Sgro & Munirul Nabin, 2017. "Cross†border Travellers and Parallel Trade: Implications for Asian Economies," The World Economy, Wiley Blackwell, vol. 40(8), pages 1531-1546, August.
    7. Hamelmann, Lisa & Klein, Gordon J., 2017. "Removing geo-blocking: What are the effects on innovation for vertically differentiated goods?," CAWM Discussion Papers 100, University of Münster, Münster Center for Economic Policy (MEP).

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    More about this item

    Keywords

    Parallel trade; Price discrimination; R&D investment; Intellectual property rights;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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